![]() ![]() Operating costs vary tremendously between different businesses but are typically slightly lower for SaaS businesses. If you’re wondering what sort of operating expenses would count within this equation for a SaaS company, it could be things like paying your staff to develop features, paying for your office space, any further labour costs, utilities, or any other factor which you must pay for to continue selling your SaaS product. When discussing income, you typically do revenue minus expenses, although we’ll discuss this later. This figure is much more important as it will allow you to plan a future budget plan, with your net profit helping you to understand more about the total amount of money your business is creating for you. Often referred to as the company’s bottom line, this is the real figure about how much your company generates after all business expenses are considered. Income, on the other hand, is about the total profit your business generates after taking away any expenses from the equation. If you want to understand your company's revenue over a certain period, it’s always better to look at that specific space of time instead of using any extrapolation. The latter option is especially useful if you tend to have above-average churn, as there would be a lack of consistency within your month-to-month revenue figures that would skew the yearly data. From there, you could also extrapolate the data to an annual recurring revenue figure or simply run the calculations for the year as a whole. If your business offers more than one method of billing clients, you’ll have a lot more flexibility when calculating your total revenue.įor example, if you’re only interested in the monthly revenue earned, then you could calculate monthly recurring revenue. SaaS businesses often offer monthly, quarterly, or annual billing cycles. There are several ways to calculate revenue within SaaS businesses due to the different payment structures that a company can rely on. ![]() Revenue is the first factor businesses will calculate, as further statistics can be concluded from there. Typically, revenue is understood as what is known as ‘top line’ or ‘gross sales’ metrics, with this being financial documentation of everything that’s coming into a business. When refining this for a SaaS business, it typically means that the total amount generated by all of your subscriptions is recurring. When working out revenue, you need to calculate the total income generated by your business activities. Let’s quickly move through the main definition of each of these terms, explaining what each entails. But, considering that they use the same unit and have similar methods to work these metrics out, they are often confused. What is the difference between revenue and income?Īlthough both income and revenue deal with financial data and money in general, they are not the same metric and cannot be considered as much.
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